Should you open a joint account?

Britons in serious relationships often avoid opening joint accounts because they do not trust their partners not to take advantage of the situation, new research shows.

But a lack of trust is not the only factor preventing people in relationships from tying the knot financially.

Figures from Norwich & Peterborough building society (N&P) reveal that many Britons are keen to protect their wealth from their partners, while others do not want their loved ones to know what they spend.

Despite this, more than six in 10 Britons say they do open a joint account when they are in a serious relationship.

Here, we examine the pros and cons of opening a joint account and suggest some of the best accounts for those who decide to take the plunge together.

Joint account advantages

If you live with a partner, opening a joint current account that can be used to cover household bills and other shared expenses can make life much more straightforward.

If both of you pay in a set amount - say between 10% and 40% of your salaries - each month, an account of this kind can also help to prevent arguments about money.

And in months where there is some cash left over you can decide together whether to use it to treat yourselves, keep it in the account for tougher times or transfer it into a savings account.

While there is always the risk of one person going on a spending spree with the cash both of you have paid into a joint current account, the fact that only a percentage of your income is directed into the account gives you a measure of protection.

For anyone concerned about privacy, this also means that only the spending from the joint account can be seen.

When it comes to savings, the main advantage of having a joint account is that you can both add to it at any time, meaning that the balance is likely to grow faster.

The Financial Services Compensation Scheme protection limit of £85,000 for savers is also unaffected by having a joint account as the limit is per individual saver, rather than per account.

Having a joint savings account is therefore very useful when it comes to saving up for big purchases such as an expensive holiday for two, or a new kitchen.

The same - in reverse - is true of loans, mortgages and other credit agreements: Two people, with two incomes, can borrow more than one person alone.

This is why young couples find it so much easier to get a foot on the housing ladder than singletons.

Joint account disadvantages

As mentioned above, one of the main problems with opening a joint account of any kind with a partner is that you are - to a greater or lesser extent - giving him or her access to your money.

If your partner turns out to be unreliable, or the relationship turns sour, you could therefore end up losing out to someone you thought you could trust.

The risks involved in taking out a current account are generally smaller as the amounts involved are lower.

However, should your partner decide to withdraw funds from a joint savings account holding a significant amount, it could prove very difficult, if not impossible, to get your share back.

Another potential disadvantage of a joint savings account is that every UK taxpayer is entitled to an annual ISA allowance that should be taken advantage of before other options are considered.

The cash ISA allowance for this tax year is £5,100 - or £10,200 for stocks and shares ISAs - so anyone with savings below this level should take out an individual ISA rather than a joint account.

Meanwhile, when it comes to credit arrangements, remember that you are jointly liable with your partner for any borrowing done as a couple.

Should he or she become unable or unwilling to meet the payments, the entire responsibility not to default will fall on you, while any black marks resulting from an inability to pay will also affect both of you.

The best accounts

If you are opening a joint current account to pay bills and other shared expenses, then you are unlikely to want to pay a fee for it or to be planning to build up a large overdraft.

Consequently, a current account offering high credit interest is probably the best choice.

It pays you £5 for each month you pay in £1,000, regardless of your balance, and charges £1 a day on authorised overdrafts. If you apply through moneysupermarket.com, you'll also qualify for £50 cashback.

You must pay in at least £1,000 between you each month to qualify for either of these accounts though.

For joint savings, meanwhile, the best easy-access account is with Nationwide's MySave Online Plus at 3.05% on £1,000 or more - although the headline rate does include a 1.51% 12-month bonus.

Again, be aware that headline rate does include a 2% bonus that runs out on March 31, 2012.

And looking at mortgages, which are the most common credit agreements taken out by couples, the best two-year fixed rate on the market is from Santander at 2.79% (with a 40% deposit), while the best tracker is from First Direct with a current rate of 1.99% and a deposit requirement of 35%.

Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.

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